Order Book And Market Depth Chart
When you place an order to buy or sell cryptocurrency, it is sent to the order book. An order book is the place where buyers meet sellers by matching opposite orders. Crypto market order book is dynamic, meaning it’s constantly updated in real-time.
A crypto exchnages order book consists of three parts: buy orders, sell orders, and trading history.
Buy orders include all the bids, the amount buyers wish to purchase, and the price.
Sell orders contain information about all the asks, amount to sell, and the price.
Trade history shows all the transactions in the order book that have taken place in the past .
At the top of the order book, you can find the highest bid price in the Buy Orders and the lowest ask price in the Sell Orders. These point to the predominant market and price that need to get an order executed. It means when you place a buy order, the lowest ask price will be the first to be filled. Conversely, when placing a sell order, then the highest bid price is the first to be filled.
A market depth chart is a visual representation of the order book, meaning it should help those who dont know how to read an order book. Market depth reflects the number of all pending buy and sell orders for a particular currency pair. With a market depth chart, it is easier to see how many traders would like to buy the selected crypto at a higher or lower price than the current one and evaluate market liquidity.
Icipants In The Market
So, to understand why the market creates support and resistance levels, you need to understand the psychology of the market. In a market, there are typically three types of participants, at any given price level:
- Traders who are going long and waiting for the price to rise.
- Traders who are going short and waiting for the price to fall.
- Traders who dont know which way to go.
Price Falling Through Support
Price can fall through a support level and meet support at another level. In this case, the original support level becomes resistance. So this is how the three participants act now:
- The traders who go long will wait for the price to come up to the original support level and sell their assets there to limit losses.
- This plays in the hands of the short traders who will want to add more to their position.
Finally, traders who havent entered the market yet will decide to go short.
So, this support line becomes a great level where all the three kinds of traders can sell at.
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Frequently Asked Questions On Bitcoin Depth Chart
1. How do you read the Bitcoin depth chart?
From left to right is the USD price, bottom to top is the quantity of USDT. The red sloping line is buy orders for USDT when the dollar price goes down very far, and the black sloping line is sell orders for when it goes up very far. The bottom chart is the orders, the top chart is the accumulated value.
2. What does a depth chart tell you?
A depth chart represents the buy and sell of orders for a specific asset at various prices in a graphical image. A depth chart shows both sides of demand and supply to illustrate how much of an asset can be sold at a specified price point. It is also arranged across the bottom by price.
3. What is depth of Binance chart?
A depth of Binance chart is a tool to evaluate the demand and supply of any crypto at any given moment for a specified price range.
The Stock Market Discounts All News
The stock market incorporates new information as soon as it becomes available. Once this news is released, the price of the asset changes to reflect this new information. The price reflects the sum of all the hopes, fears, and expectations of all the market participants. Factors such as interest rate movements, earning expectations, revenue projections, major elections, product initiatives, etc. are all integrated into the market price.
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A The Types Of Charts
There are several types of digital asset price charts. However, the most popular and most widely used are:
- Line charts. The basic chart, where crypto-asset price changes are conveyed by using a single line and show the closing or opening price during the specific time frame.
- Bar charts. A more detailed chart, that shows the opening and closing price as well as the highs and lows of the bar, which represents a specific time frame.
- Candlestick charts. Similar to bar charts, but have a body and are better visible.
While the candlestick pattern is most widely used among digital asset traders, DailyCoin will introduce the most common trading chart patterns to a better knowledge of how to read Bitcoin charts and identify trading opportunities.
Price Rising From Support
When the price bounces off a support level and goes up, the three participants react like this:
- The traders who are going long are really happy with the state of the market. They may also try to add even more to their position if the price drops doing to the same support level.
- The traders who are going short may second-guess their position and try to buy in more to breakeven as the price reaches the support level again.
The traders who didnt enter the market previously may want to wait for the price to get back down to the support level to enter the market.
So, this support line becomes a great level where all the three kinds of traders can buy in.
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The Background Behind Buy/sell Walls
You might be wondering if you should even worry about buy/sell walls. In almost every market buying/selling walls are becoming more popular across different exchanges. There are significant buy/sell orders for all popular coins. In general, you should have a look at the right column on Bittrex to see if the coin has a minimum trading volume of 500 Bitcoins to ensure enough liquidity and movement. Several people purchased the currencies at a rock-bottom price and hoped to cash out as soon as they can.
Also, whales effectively control the prices of crypto-currency when theyre able to do that. They dont benefit when they let any currencies break above a particular level until theyre profiting. In many cases, a sell wall is a fake oppression tool thats used to keep prices far below the max. threshold. This allows whales to purchase tons of cheap coins. We will go over that later on How to spot a fake wall. When people have enough money to manipulate a particular market, its likely someone will try to achieve that goal.
A big question that will always exist is if theres any particular strategy linked to keeping prices low beside from the point of view that involves projections. It doesnt seem theres a justification for big buy & sell orders to show up less a person is trying to control the market. There are several favorite trading strategies, but buy & sell walls arent part of them.
Whats Wrong With A Whale Wall
You may be wondering why this a problem. Its because when whales set these orders, they create large unfillable sell orders to keep the price low in order to buy more coins at a lower price. Once they have accumulated whatever they can, they can remove their sell orders. This causes a dramatic elimination of the wall that they created and the price shoots back up.
Because they have such large holdings and capital, this process can be repeated until they have acquired a large portion of the coin. Now the whale will benefit from the higher coin value that they purchased at a manufactured low. Two such infamous whales are Roger Ver and Jihan Wu. These guys manufacture disruption in a currency, buy low and sell high. And because this technique creates liquidity, the whale takes advantage of smaller investors and uses them as chum for them to get rich.
Guidelines for risk management
Traditional and institutional investors manufacture sell walls as an investment strategy as well. It is simply a method to make a perceived downturn on an otherwise profitable stock. The primary difference is that it is a bit easier to do in the crypto-world because it is such a young market.
Right now we are still dealing with earlier investors that control the market, but do not necessarily act in the markets best interests. However, this strategy is not as effective in a bull market, where investors are snapping up holdings. But it is still possible in slightly smaller, younger crypto-markets.
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Crypto Market Sentiment: Bulls Vs Bears
Bitcoin and crypto markets move in three directions upwards, downwards, and sideways. A market that is moving upwards is considered to be bullish whereas a downwards one is bearish. A sideways market is considered range-bound or consolidating. The single most pertinent saying when it comes to crypto charts is:
Trend is your friend
Price direction is far more likely to follow the current trend than to reverse it. Market sentiment also follows this as long term trends do not change very often. Bitcoin bull and bear markets can last a couple of years before they finally reverse.
Within a trend can be several rallies, corrections, or pullbacks where it appears to reverse, only to resume the original trend after a period of time. After all, prices do not move in a straight line. Using crypto price analysis and chart patterns can reveal these potential changes in a trend on different time frames.
Overlapping Values Are Arbitrage
Notice the overlap in the green and red lines. In this example, there are buyers willing to buy at a price up to $5,996/BTC and sellers willing to sell at a price down to $5,983/BTC.
The overlap between $5,996 and $5,983 is possible because of SFOX’s aggregated orderbook from many global exchanges and liquidity providers and is an arbitrage opportunity to SFOX traders.
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How To Understand A Market Depth Chart To Determine Liquidity
Supply and demand is at the heart of business itself, without both commerce would cease to exist. If only there was a way to see both supply and demand for a particular asset. Well, a depth chart provides just that info!
A depth chart is a visual representation of buy and sell orders for a particular asset at varied prices. This kind of chart illustrates both sides of supply and demand to show exactly how much of an asset you can sell at a particular price point.
On the left side in green we have bids/buy orders which are displayed between a range of prices located on the x-axis. On the right side we have ask/sell orders which are displayed in red with their respective values on the x-axis.
In an ideal case, you would want the x-axis values to be as close together as possible.
When there is a set supply and varied demand the value of any particular asset will fluctuate. These fluctuations are reflected in the overall mid market price, which averages out both sides of the graph.
Each line on the depth chart is created by plotting dots which indicate the quantity of an asset at a particular price. Individuals sell the same asset for different prices which creates the step like visual representation we see on the graph itself.
Depth Chart What Is It
A depth chart is a kind of visualization that informs us about the demand and supply of a particular asset at different prices. It is based on the order book data, that is, the number of open buy and sell orders, including the quantity of the asset. The greater volume of such orders, the more liquid the market for that asset.
Traders use the real-time supply and demand to assess the likely direction of an assets price. Additionally, it is used to estimate the number of units of an asset that can be purchased without causing its price to jump. As an example, the price of a very liquid asset is not that likely to change much after a big order is fulfilled. The same cannot be said about assets that lack liquidity.
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What Is Technical Analysis The Key To Profitable Trading And Investing
Ever wonder how to read Binance charts? Technical analysis is the answer. Beyond simple or even advanced candlestick patterns on crypto charts, trend lines can be drawn across peaks and troughs or support and resistance to form shapes and patterns that can be used to predict price action.
Certain technical indicators and oscillators also exist that can provide traders with a unique read in certain market conditions such as momentum, volatility,volume, and more. Indicators appear below or layered over the trading activity on a Bitcoin price chart.
What Is Market Depth
Market depth refers to a market’s ability to absorb relatively large without significantly impacting the price of the security. Market depth considers the overall level and breadth of open orders, bids, and offers, and usually refers to trading within an individual security. Typically, the more buy and sell orders that exist, the greater the depth of the marketprovided that those orders are dispersed fairly evenly around the current market price of that security.
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Buy Walls And Sell Walls: An Informative Guide
This article explains exactly what buy and sell walls are, as well as how to interpret what they mean for cryptocurrency trading.
In the broadest sense, buy walls and sell walls indicate a market-trend. So, if a currency is strong, the sell walls are a little lower because traders are more interested in holding on to their coins. To contrast, with the same strong currency, the buy wall is a little higher, because there are more traders who want to buy the coin at the best price possible.
Take a look at the image below. This is a depth chart of Bitcoin from Binance at the time of this article. It is an example of a pretty healthy buy to sell ratio for Bitcoin. What it indicates is that the currency is strong and desirable, and therefore traders are buying and selling at a fairly steady cost. So the green shows the bids, and the red shows the asks.
The other reason that we can read this chart positively is that it is fairly symmetrical, and kind of looks like a staircase. All this means is that there are no radical dumps or sells on the horizon and that the coin is being traded steadily and normally. This is fitting because Bitcoin is a strong currency.
What Is Technical Analysis
Now that we know the six tenets of the Dow Theory lets look into what technical analysis is. Technical analysis is a tool, or method, used to predict the probable future price movement of a currency pair, cryptocurrency pair, or a stock. It can be a creative and dynamic which helps you gain a very deep perspective into the market.
Image Credit: xkcd
Dont worry, technical analysis isnt as complicated or scary as that! So, lets get started.
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Morning Star Candle Pattern
A morning star candle occurs when a doji appears at the bottom of a move, and is followed by an equally strong move upward. A doji is a candle with little to no body and very limited wicks or shadows.
This shows a strong move down by sellers, followed by a pause of indecision before the direction ultimately reverses.
Best Cryptocurrency Charts For Technical Analysis In 2021
- by BitShills
Every trades needs access to the industrys best cryptocurrency charts.
Whether you are a holder or trader, If you are serious about making money with cryptocurrencies, having access to the best cryptocurrency charts is key.
Cryptocurrency charts provide you a real-time look into various cryptos and their performance. And this is actually the only true way to buy and sell cryptocurrencies without being blindfolded.
This is why its also important to learn to use cryptocurrency price charts properly, as they can give users a huge advance over those who have no idea how the price is advancing at any given time.
Once you understand the basics of trading, investing, and what moves the markets, charting cryptocurrencies becomes like a dance you enjoy doing without much thinking.
That being said, here we have listed some of the most well known and used cryptocurrency price charts and platforms that you can use today to do your technical analysis.
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Candlestick: What Does It Say
Candlestick charts are one of the most visual cryptocurrency price charts. These charts are easy-to-read.
First of all, a single candlestick represents a certain period of time on which you are trading or analyzing the historic price changes. The candles come in two colors: green and red. Each of them indicates who is controlling the market: the bulls or the bears .
Secondly, the candlesticks are very informative. Each candle reveals four pieces of information at once. The candles body shows the assets opening and closing price. The green candle means that the closing price is higher than the opening. The red one indicates the price drop when the closing price is lower when openings.
Finally, the wicks attached to the candles body indicate the highest and lowest prices within a certain time period. The length of the wick provides us with valuable trading information. The short wick means that trading sessions happened around the opening and closing price levels. Meanwhile, long wick signals higher volatility in prices.
Candlesticks are a great tool to predict a trend. There are various types of candlestick patterns for that. However, a good trader should not rely solely on them. A good trader uses candlesticks together with the other technical analysis tools to confirm a trend and enter the market.